Shares in Man Group tumbled by a quarter yesterday after the world's biggest hedge fund suffered a slump in assets under management, saying customers had deserted it the face of heightened market volatility.
Man was the biggest faller on the FTSE 100 yesterday, losing £1.1bn of its market value, after the company reported that its assets under management were on course to fall by 8.5 per cent to $65bn (£42bn) in the three months to 30 September.
Existing investors pulled $7.1bn in cash from the hedge fund during the period, while the value of its remaining assets declined. Man Group said new investment fell by half to $4.5bn in the second quarter of its financial year, resulting in a net outflow of $2.6bn.
A further $1.9bn of the overall $6bn drop in Man's assets under management can be attributed to a $1.5bn decline in the value of its remaining investments. Meanwhile, the rise of the US dollar against the euro and the Australian dollar knocked a further $1.9bn from its asset value, as Man translated non-US dollar revenues back into the American currency.
Peter Clarke, the chief executive, said: "The extreme volatility of markets in recent months has created challenging conditions across asset classes. We are assuming that investor appetite will remain suppressed for the remainder of the year."
He added: "Sentiment is clearly in the doldrums. A lot of what happens from here will be dictated by wider market sentiment."
Analysts at Peel Hunt said in a note: "This statement is clearly disappointing. It is clear that there are significant downgrades [to our forecasts]."
Man also revealed yesterday that its pre-tax profits for the six months to the end of September were on course to fall to $185m, from $230m in the same period a year ago. Management and performance fees declined by 8.4 per cent to $230m.
Mr Clarke added: "Although assets under management reduced in the second quarter, primarily as a result of market movements in long-only and the impact of foreign exchange translation from the weakening euro, management fees for the half have been broadly stable on a like-for-like basis.
Man's trading update raises the possibility of heavy client outflows across the $2trillion global hedge fund industry, which had been recovering strongly after suffering nearly $300bn of redemptions during the credit crisis in 2008 and 2009, according to analysis by Hedge Fund Research.
Man's troubles emerged two days after Aberdeen Asset Management said its clients had pulled £800m from its investment funds in two months. This contributed to an overall decline of £8.9bn, or 4.8 per cent, to £176.9bn in the value of Aberdeen's assets.